tv Today in Washington CSPAN February 6, 2010 2:00am-6:00am EST
to track and account for what is it that i said before no one wants to see conferences stopped if there is by you or travel there is value going to las vegas am looking at the programs out there if it is legitimate. we don't want to give ourselves in a position where people are looked at with a jaundiced eye because of doing this. if we cannot account for its you can't justify the jon desai. but i certainly hope the person said we don't have accountability because we have a limited spending has been educated of the rise and is doing business differently. the truth is everyone of us behind this podium in that year seeds are responsible for taxpayer dollars.
i think it is fair to say for the first seven years of the dhs existence that responsibility among some was taken lightly. not very seriously. we will change that. this subcommittee did you and i will change that. the taxpayers need to know that especially in times like this the monday's they are spending to keep the government running are being spent well and wisely and to keep us safe. i appreciate your both coming here. . . . .
industrial base that was in crisis. and we needed to spend some time about it. i rather think we're coming to that point again. and we're going to have to spend some energy and time thinking about this. now, we're fortunate to have brett with us this morning. he -- you know, he chose this over staying home with sick children. i'm not sure which is the worst problem he's working with. but we're glad he did choose to come with us and he's going to share some of his thoughts. and we've got a worthy panel. it looks like an old dutch masters print. we're a bunch of grumpy white guys sitting around a table. so -- but i have a feeling it'll be better. and it actually -- these are the best intellects that we have that can bring to bear cross cutting perspectives. brett, let's get started. let's get started, brett. you start the way. but thanks. let's welcome brett lambert.
>> thanks. that was a nice introduction. the best one i've had in a few months. usually they say who's that guy in the back row when i get introduced. but i wanted to start by saying just a couple of overall general things. i'm new to the building. and i was reminded by a friend of mine who took a job at a big foundation some time ago when the -- and a lot of you in this room know that individual. but he was told by the foundation director that in his new position he would never again get a sincere compliment or a bad meal. and what i've learned is a little bit worried about introductions because i get nice compliments, but i can't accept the meal any more. anyway, i left a dollar back by
the table and these guys saw me for the coffee. i want to thank the doctor not just for his time this morning, but over the years being a true mentor to me. and i think most of the people up here at this table. he's -- i really valued and hopefully the building will benefit from your willingness, sir, in essence share your experiences and insight. and i know i'm not the only one here. i'm looking around the room. and i can see about half of you have benefitted from his generosity. and david, it's an impressive room. so i appreciate everyone who came out. my grandfather used to say that the value of a man was -- when the local farmers met for coffee and you weren't there, they would still say nice things about you. and assure you we say nice things about you when we're having coffee. that said, as a midwesterner that you took under your wings
and being from western kansas, i still want to convince you that south dakota is part of the east coast establishment. just so you know. but thanks for everyone who braved the weather forecast to come out this morning. the good news is that i think this will be the last meeting of your day, then everyone can go home. i came from the pentagon, plan to go back to the pentagon. but i realized as i was going there this morning that i don't have a good understanding of whether we've insourced or outsourced the snow removal. so i'm trying to figure that out before we head back. that's really meant for you the insourcing/outsourcing line there. we're trying to get clarification. i also want to thank david for setting this up. it's a great topic. an incredible panel. and i went through the list of those that were scheduled to show up. and i have to say, i'm very humbled by this. i feel like i'm coming home.
my first job in washington, d.c. was actually in this building. when i was a freshman at kansas state i applied for a position or a stint at georgetown university. but we didn't have money. and so i also applied and i'm happy that georgetown was more than generous. even though my mom didn't know i did it, i arrived here. so i spent my first internship in washington under the famous bill taylor, colonel taylor and afternoons with senator robert dole when he was on the finance committee. so yes, i'm that old. that's how long ago it will be since i first came here. so i appreciate being back. i've been around csis for almost 20 years now in different forums. and it's just a wonderful institution. it's given so much to our nation
and so much of the interaction that we're going to have here today would not be possible without good offices of csis. so i thank them for setting this up. now, i've only been in the department for a few months. so i get a little nervous when i speak publicly because i'm told to stay away from -- well, no, it's more self-regulating at this point than it is anything else. but i'm trying to bring to the department a new understanding of the industrial base. and industrial capacity. i'm stepping on a lot of toes, which i did in my previous life and industry. and i find the differences that these toes tend to be heavily armed and very dominating in many ways. so that's one issue. not to mention that when i accepted the position, i was asked that one of the things we want you to do is think outside
the box. think about industrial policy, about the industrial base. we really need to get a handle on that. and in the first few months, it's taken me some time to realize that my box has five sides and a lid. so this is more complicated than i thought it was going to be. so my transition has been interesting from a personal perspective. as many of you know, in my life in the private sector, i spent a lot of time questioning the skills, the capabilities, and frankly the intelligence of what the government was doing. i'm happy to report that i spend now more time defending the skills, capabilities, and the intelligence of what we're doing in government. so a different dynamic. and i'll get specifically to some other experienced that i've had in the building that i think are actually quite positive both for industry and the overall security of the country.
i was asked today to talk specifically about industrial policy in the context of the qdr. so that's where i'm going to focus and how it was pulled -- the threads were pulled through the qdr. and i'll try as best as i can to answer specific questions about programs. but i'd like to set more of a tone in the overall context. and i want to start by saying i can't say enough about my contemporaries and new colleagues in the building and particularly those that really pushed in the qdr for industrial policy to be a high priority. bottom line is, we wouldn't be having this meeting today without the acknowledgment of secretary -- my boss, dr. carter, secretary, and secretary lynn that issues are serious and concerning issues. they all get it. and for those of you that think
has to date been one of -- if not the most positive experiences i've felt where my organization was able to move the ball forward for the war fighter, the taxpayer, and our partners in industry. again, i just can't say enough about the often criticized but too rarely recognized policy organization within the pentagon. and i think it's also important to put the qdr in a bit of common sense perspective going back to my kansas roots. no documents can answer all of the questions or all the musings
of all the people. if it could, i would suggest that we rebrand it. guarantee results for 2020, sell it for $14.95 and try to pay down the debt. it doesn't happen. it's a tool and an exercise. i'm a climber. and over the years i've learned the hard way that it's necessary to exercise before you climb. the exercise doesn't climb the mountain. but you can't climb the mountain without exercise. the qdr is an exercise that informs, that guides, and shapes our vision as a department. but it alone doesn't get us to the summit. it's a tool. and for the first time in a long time, i personally believe it's not only recognized the reality, but embraced in terms of industrial policy and again my thanks go out to those in the department who asked for our input. when i was first hired, dr.
carter relaid me a story that gates told him when he first assumed the position. the military had gone to war, but the department had not. and he wanted to change this. and i can assure you that this has not been lost on me or anyone in my group. everything i say today should be viewed through that optic as should the qdr. we are at wars plural. my job as i see it is to focus on those areas where from a policy perspective we make the right decisions for the right reasons that have the greatest positive impact. not just on the war fighters in the field today, but those who are be deployed in the next 18 to 36 months and the systems and individuals who will be deployed well after i leave this office. this is truly a high wire act. where we are tempting to balance immediate requirements while ensuring a sensible long-term
policy that will maintain premiere military dominance over potential adversaries in the future. this isn't a u.s. government challenge. it's not a d.o.d. challenge. it's a national challenge. and we cannot achieve our objectives without the dedication and support of our industrial partners. despite spending almost $2 billion a day, which is a lot. the department doesn't actually build that many things. we pay others to provide the goods and services for our war fighters. we don't build fighters. we pay someone to design, test, perform quality assurance, assemble, test again, and then support thousands, hundreds of thousands of parts. we count on our partners to make it fly, make it sustainable, and make it perform the missions we expect it to perform. and i use this phrase partner because we in the department, again, cannot do it alone. an industry cannot do it alone. both a department and industry
for better or worse are co-department on one another. we're not going back in most cases to an arsenal system as the doctor prescribed because we realized it did not work. we cannot fulfill the responsibilities and they cannot fulfill their patriotic responsibilities without the department. even with this recognition as the qdr states, the federal government as a whole and the pentagon in particular needs to do a better job of understanding the true nature of our industrial base. i wish i could stand here today and say that the decades' long primary hands off approach to our base could be remedied quickly. unfortunately, i can't. the problems we face and the solutions we seek will take time to fully recognize and adequately address. as we have in the past, the department will continue to rely on our market forces to shape and sustain our base whenever possible. that being said, the department
must be prepared and must retain the ability to intervene when necessary to create and sustain innovation and essential industrial capabilities and skills that promote our national security. this means that a greater understanding of the industry is needed. the industry as a whole is a complex web of teaming agreements, shifting stock symbols and company mergers. keeping track of this is a job in and of itself. on a side note, before anyone jumps to a conclusion that we're seeking to become some smithian hand lording over the industry, let me emphasize i want on our wall what we need is more insight before we offer advice for more oversight. we simply do not have the insight we need today. we need first to know the facts so that any prescriptions to problems identified are not gun slinging but gun smithing.
and dr. henry, i stole that line from you because i was quite taken with it sometime ago. the notion that the defense industry is just some monolithic. the goods and services of the war fighter reaches far and deeper into the overall economy. there are unique items that only the department of defense procures. but even there, we must recognize that they are dependent upon a complex and integrated supply chain of product suppliers. when the supply chain is constrained at the second, third, or fourth-level tiers. the ability of the primes to support our troops in battle is jeopardized. i realize that the effort we're undertaking is complex. but we believe it's necessary. many of the defense industries jobs that require the most perishable skills reside with the smaller, non-prime
suppliers. their survival is dependent on factors largely out of their control. they're small, highly specialized companies dependent on the primes and their unique requirements to fund the continued existence. the cascading effects is one of the primary reasons we need better understand the structure of this industry and the situations that subtiers face. this will help us understand potential impacts for programmatic decisions and understand critical lower tier providers that we ensure that they have the capacity to respond to these immediate needs to get systems to the battlefie battlefield. that the continued supply of critical subcomponents to our base will not be jeopardized. and to ensure that the critical skilled jobs -- and i want to emphasize that, skilled jobs are not lost to this nation. i'd like to cover one other area that i have long believed was
far too overlooked and that's the financial community. and i thank byron for his years of wisdom for making -- getting me smart on this. from small technology start-ups, which the venture capital funding to debt markets that provide the capital support as programs mature and evolve, the department must simply ensure that we don't take the access to capital for granted. and we must work to form a more transparent view of our requirements and investment plans. in that vein, we recently conducted a round table with wall street analysts to give them more transparency, more vision, more understanding into what the department was planning. there are no shortage of other issues that our office has been engaged. from the defense production act to conflicts of interest to rare minerals to biodefense, to export controls, export
promotion, solid rocket motors. next generation bomber. so that's what our folks here we did this morning worked on those issues. the bottom line is i firmly believe we simply need an industrial policy more wholistic approach. and it'll be led by three goals. getting our office in front of issues instead of chasing them, striving to adopt rules of reason in all things related to industrial policy, and reestablishing a true partnership with industry and the financial community. finally, i want to make clear that we should not confuse support for the private sector as advocacy. the department -- the department's renewed engagement with industry doesn't mean that as the qdr says we will support sunset industries or prop up poor business models. as secretary gates has clearly
demonstrated with the past two budget submittals, he is determined to terminate programs that are not needed or not performing. i'd like to conclude on a personal note, and although it may sound somewhat hokey to those who haven't had the opportunity to be in public service. in the short time i've been in the building, i've learned that industrial policy, and particularly my bosses, this is not an academic exercise. this is not a 9:00 to 5:00 job, as my wife and children have learned. if we want to maintain a competitive industry in an increasingly restrained environment than industry and government must work together to stick to those requirements and to keep the skilled jobs necessary to bring those programs to fruition. the bottom line is, i wouldn't come to work every day if i
didn't firmly believe that industry and the department have at this moment in time with this leadership team an opportunity to get in front of many of these key issues before they become problems. and i hope my office has a small role to play in that endeavor. we must open and keep open honest, transparent, clear lip understandable lines of communication. and i believe that the threads and that vision is pulled through the qdr. and it's a good start for that climb. i appreciate csis hosting this event. i think it's very important. and i particularly appreciate everyone coming out. hopefully the cars -- hopefully the plow won't go by your cars before you leave today. thank you very much. >> we'll take a few questions. if you want to take a few questions from the podium before
we move on just an opportunity to get questions in before we move on to the additional comments. seeing only one, terry murphy in the back row there. identify yourself and your affiliation as you ask your question. >> i'm terry murphy. i have the honor of being with csis. a comment to a couple of midwesterners. and that is it's not just the cold war. i think we went to ww ii with countless -- i can't begin to tell you how many bombers in ten minutes. and the kaiser shipbuilding produced ships once a month and everything else is amazing performances when that was done. so i would only simply remind the reel of one war back. nice job.
>> i appreciate those comments. that's an important thing. it's also important to understand the transition i think the qdr points out quite effectively. in all lines, all manufacturing lines eventually come to an end. we -- that's just the nature of commerce. we at one point in time were manufacturing two aircraft per hour. out in california.@ @ @ @ @ @ @b
>> i'm just curious. we had secretary gates announce a major $614 million against lockheed martin. they're not earning that award fee. same day the mda had kind of a tirade about lack of quality in the products that mda is receiving from its contractors. do you think those issues are issues that are indicative of an industrial base that is atrophy. on part of the pentagon or the contractors, is it poor contracting? does that have anything to do with this industrial base issue? >> i'd say no, no, and no. next? no, i'm not qualified to talk to that point. that is dr. carter has been following this issue closely. what i can say is that the
department has been working closely with the contractor. it's obviously very important program for us. we think it's going to be successful. we understand what the base required to support the program is. and i think we've taken, again, this is way out of my lane. and others here -- actually byron probably might know more than i do about this. but i'm encouraged by the interaction between the department and the contractors. it's a good thing to see. it's been honest and open dialogue. and i think all parties are on board with where we need to go. >> i'm sorry, i didn't mean to focus, but just bigger picture. is there an overall quality problem that's making the industrial base situation worse? if companies aren't earning award fees for poor quality or poor performance, that's hitting their bottom line, which is hitting their right-hand available dollars. >> sure. again, i wouldn't be qualified. i've only had small insights in
that and i haven't had enough time to make a judgment. >> let's do one last question and then we'll have another question session after the panel has their remarks. >> how concerned -- what's the level of appreciation of a policy problem around a shareholder arsenal developing in the next decade? essentially having companies that are down to one product line on some of the programs like aircraft? >> well, i think it's a concern. we're -- we are -- my office in particular has been asked to address some issues in that regard. everyone remembers, of course, the famous last supper that took place in '93. and my boss, dr. carter was at that meeting. so i think we're -- we're cognizant of that issue and whether it be in shipbuilding or aircraft manufacturing. we understand that. and we're trying to get our arms
around it. we have not come to any decision about what the policy should be. as i said right now, we're trying to get more insight than oversight. so i wouldn't expect to see any -- i wouldn't expect to see any kind of prescriptions for any potential issues in the near term. >> all right. thank you. if you'll hold the rest of your questions, we'll now turn to our panel of experts have that joined us this morning. starting immediately to mr. lambert's left is jeff. he had the same job brett had in the administration twice removed, the clinton administration to jeff's left is byron kalin who here represents wall street here today. and it is noteworthy -- >> and has not yet been arrested.
>> only in his -- it is useful to note that there has not been a qdr before that even had the phrase access to capital in its text. and so there's a change just in the recognition of that dynamic as important to defense and to the industrial base. to byron's left is alan. alan is here because, in fact, half of our industrial base now, half of the money that d.o.d. spends under contract is with services rather than for platforms and systems and research and technology. and a recognition of that, i think, is something that is important for us to focus on today and to look at the qdr through that prism and lens. so he is here representing that side of the equation. and then finally, bill greenwalt who was also a previous secretary in the bush administration. so we've got a group here who is proild proid a variety of perspectives on this qdr itself
and on what it says and what it doesn't say. i'll ask that they'll each provide some remarks. you hold your questions when the four of them have finished, we'll open the floor for questions. but i am reserving the first question for brett lambert who has graciously agreed to stay through the panel session, as well. you get to think about what you're going to ask these guys as they're going through their process. so with that, jeff, you've got the floor. >> i look around the room. it may be -- and john cameron maybe -- >> helps to turn it on.
being here with john hammry made me think about the changing errors, if you will, that we face. we've been in the bull market in defense the last seven or eight years here after 9/11. and it does look like we're at something of a crossroads. and i think what john touched on is that, you know, are we back to the late '90s? in a period where he gave his speech bemoaning the fact that the capital value of major defense contractors was martha stewart and her enterprise. and the question is, as budgets flatten inevitably in the next period, is our industry able to weather the storm? and i would submit. i didn't come here to have this discussion per se, but i would submit our companies are better equipped today to weather a flattening of demand and maybe even some declaration. it points out the need for vigilance in an era where we're going to see potentially some
flattening and declination of demand and you're apt to say concerns about the industrial base. and i think john's point was we have to watch out for the frey ji fragilities. we're here to talk about this in the context of the qdr. let me make a general comments and talk about the defense industry. first of all, this qdr, it's evolutionary not revolutionary. and that's to be expected. we have a secretary of defense in his third year in office. and this qdr is entirely consistent with, by the way, quite good. entirely consistent with the speeches, actions, and budget decisions over particularly the last year and a half. but really the whole tenure of office. it would be shocking at this point if it was a radical departure. i think continuity was good. but in that continuity is change because he's effectively say let's shift the focus, let's shift the balance towards the wars we're fighting and this
pertains to the acquisition community and the comment that brett made that the defense department and atl isn't. let's shift the balance towards the wars we're fighting. it's very hard to disagree therefore with the vectors in this qdr. a few other just general points of things that i think are noteworthy in this qdr that relate in general ways to the industry. one is fore structure. if you're going to shift the balance, one thing to think about is to make adjustments to the fore structure. we have an army under stress. we have an army that has shifted its focus toward the continuum of conflicts, fighting. but there are two questions going forward. which is, one, is the army really institutionalizing this change away from the concept of fighting the big one to essentially becoming in some respects a large special operations force?
and two, can we shift the fore structure, the active army force and the reserve in a way that takes the stresses off? and i think these issues were not addressed in the qdr, but my impression is they're going to be addressed going forward. i think it's hard to restructure the force when it's at war, frankly. but i think it is an important issue as you go forward. second, which again relates to the industry, a little discussion of int intraoperatability. but i think there's not that much focus on less focus on europe and the role of europe in our defense. in part that's probably deference to the nato strategic concept has not come out yet. but i would say there were two points here. one, if you look at who it is we fight with in expeditionary warfare, who goes to war with us, it's our european brethren. and my own view is we need to do
much more things now, more robust agenda to maintain operatability. two, i think that -- and so we need greater forces likely at different levels of capability for years to come. two, the reality is europe has large lly -- most of europe is focussed on low intensity war effort. and we need to encourage that. because we need to have that burden shared. and all of this points towards some degree of more cooperative defense programs with europeans and more efforts to ensure that we can work with them in an eccentric environment. and i think those to me should be priorities and i would hope as we go forward, not mentioning the qdr, they become greater priorities. i was heartened to see a mention of the eu at the qdr. i didn't go back and look, but this was the first qdr that
mentions the european union. and it reflects the fact that the eu was taking on a more prominent role, particularly in the low intensity side and put directives out there to open its internal defense market. and one point, i think, it's not quite mentioned in the qdr, but an important point, i believe the defense department needs to engage much more deeply with the european union on a range of issues from civil military collaboration to defense market. we just finished a study at john's hopkins and that was one of the key findings in that study. i think there has been movement in the pentagon from this to the point where you hear people on the policy side of the house saying we're open to engaging with the eu. i think we have to move beyond that and develop a robust agenda with our most important partner in these areas. now, let me turn now to the defense industry. as i said, as i kind of jokingly
said, there is not much in the qdr specifically, but what there is quite good and i think brett has laid out a very good vision in this area. and i think the qdr's properly focussed on both the demand and the supply side of the equation. if you will, and the question is what are the acquisition system deficiencies on the demand side? and what do we do? and this is really the question to ensure we have the industrial capabilities to meet our national security needs for the future. and particularly as i said, how do we do this in an era of potentially declining demand. we're back to that era potentially where it's flattening and potentially declining. and how do we make sure that we address the fragilities of the industry in effect as they happen. on a demand side, the